1/ IL protection is a big deal for @THORChain. At first glance, it seems only important for protecting LP capital, but it will likely help to optimize the network in terms of efficiency as well. Read on: https://twitter.com/THORChain/status/1387334225909534723

2/ For a long time, single-chain Chaosnet has been overbonded with regards to the Incentive Pendulum, meaning more than 67% of RUNE in the system is being bonded instead of pooled.

3/ This is a problem because more capital is being put into the network to protect pooled assets than the assets are actually worth. Otherwise, the capital could be deployed into LPs to increase the depth of the pools and thus, the utility of the system.

4/ The incentive pendulum naturally encourages node operators to decrease their bond and LP those funds instead as the system becomes increasingly overbonded. It does this by decreasing node operator rewards, and increasing LP rewards.

5/ Now the question is, why doesn't the incentive pendulum seem to be working? Well, it is, but node operators just don't seem to care. As you can see clearly here, incentives for LPing are currently much larger than for running a node due to the network's inefficient state.

6/ Many people have come to think that the reason for this is that node operators are simply lazy to unbond the capital from their nodes and redeploy to LPs. However, I don't think this is the case. More likely than not the node operators are worried about IL as well!

7/ Remember that most node operators are heavily bullish on RUNE and believe that it will outperform most other crypto assets. Regardless of the high APRs offered by the LPs, there is no guarantee that there won't be impermanent loss with regards to their RUNE holdings.

8/ As a result, they would rather keep their RUNE deployed to the safe haven that is their node, as it may only offer 20% APR, but this is paid out 100% in RUNE-thus no chance of IL.

9/ With the advent of IL protection on multi-chain, this issue becomes moot. Node operators can safely LP their excess RUNE liquidity when the network is overbonded, and not have to worry about their stack of RUNE being diluted.

10/ The only downside I can see is the fact that protection will take 100 days to kick in. Because of the highly dynamic nature of the incentive pendulum and the network in general, this may still be a bit of a turn off. We will see how it plays out as MCCN matures! #RAISETHECAPS